LIVE FUTURES REPORT 30/10: LME base metals prices broadly capped by low volumes before Fed news

Three-month base metals traded on the London Metal Exchange mostly failed to make gains in the morning session on Wednesday October 30 amid low volumes traded across the complex, with a weaker dollar index, down by 0.04% at 97.65, failing to stimulate investors’ appetites.

The global macro picture continues to exert a hold over the metals market while United States-China trade tensions rumble on, and participants are no doubt awaiting an interest rate cut announcement from the US Federal Reserve later today.

Dovish whispers from the US central bank continue to pervade the market with participants largely anticipating a rate cut, though buying appetite across the metals remains dampened with bears kept on the sidelines in anticipation of the news.

“My general view is that the mood at the LME Week dinner was slightly subdued and the majority of market participants seem to believe that the signing of a trade deal between China and the US is key to the markets being able to move forwards,” Kingdom Futures director Malcolm Freeman said in a morning note.

Quarterly gross domestic product (GDP) figures from the US are due later and are expected to show that growth in the world’s largest economy slowed to 1.6% in the third quarter of 2019 from 2% previously, which is in line with a general slowdown in other global economies.

This global economic slowdown has resulted in a generally lackluster demand for base metals because faltering GDP growth halts many infrastructural development projects.

Nonetheless, the LME three-month nickel price outperformed the rest of the base metals complex, trading up 0.5% to reach a high of $16,920 during the morning session from the $16,830-per-tonne close on Tuesday.

Ongoing and somewhat contentious drawdowns of LME nickel continued on Wednesday though to a lesser degree, with 1,278 tonnes flowing out of LME-approved sheds versus just 24 tonnes flowing in at the same time, leaving LME nickel stocks at 67,908 tonnes. 222 tonnes of material were re-warranted leaving on warrant stocks at 30,576 tonnes.

While the displacement between market fundamentals and the LME three-month nickel price continues, participants remain divided on the future of the market.

“There were more conspiracy theories than LME dinner attendees regarding what is happening in the nickel market,” Freeman said. “Is demand for metal from [Chinese stainless steel producer] Tsingshan real or a cleverly-constructed technical squeeze to force the prices of [domestically-produced] nickel pig iron up? Apparent potential for a squeeze in nickel is distorting the entire market structure.”

Other highlights

  • In data on Wednesday, the US Federal Open Market Committee’s two-day meeting concludes, which is followed by the release of the committee’s statement, rate decision and press conference.
  • Additionally, the US’ ADP non-farm employment change is also due, expected to decline to 125,000 from 135,000 previously.